Telecom as failure of enterprise

Telecom is hailed as India’s major success story in infrastructure. True, there have been some signal achievements. However, it is perfectly viable to see Indian telecom as a case study in failure of entrepreneurial imagination and ambition. This failure is of two kinds: absence of a major Indian telecom equipment maker and the failure of telecom operators to engineer the sort of networks that would prevent them from being drowned by the coming deluge of convergence — of mobile and fixed line telephony, the internet and television. Take the leading operator, Bharti. It has outsourced its telecom networks to Ericsson and Nokia, and its customer service as well. Bharti concentrates on brand building and customer acquisition. Its own specialised capability in telecom is zilch. Of course, there is nothing wrong with this. There is no greater virtue to a rupee earned from telecom as compared to a rupee earned from telecom brand-building. The problem: the business model could come unstuck if the company doesn’t keep pace with changes in the telecom industry. To keep pace with technological change, one has to engage with telecom itself, rather than merely with brand equity. Indian telecom operators place billions of dollars worth of orders for equipment. The bidders for these orders are American and European companies besides hapless Chinese firms mindlessly blacklisted by India’s national security apparatus. This spells out the other kind of failure — to develop Indian capability to build sophisticated telecom equipment. Public sector telecom equipment maker ITI specialised in buying foreign multinational companies’ proprietary technology and components at fancy prices and supplying the same to the Department of Telecom with minimal value addition. Then came along HFCL in the early nineties, carrying out sufficient R&D to do away with proprietary technologies and components. It brought down equipment prices by a factor of six. Unfortunately, HFCL got sucked into stock market games, and lost its equipment focus. Shyam, an equipment maker that showed initial promise, remained small. The companies that have the potential to emerge as major Indian telecom equipment manufacturers are not these anymore. They are our IT majors, particularly Wipro and HCL which have capability in both hardware and software. Satyam, with a focus on engineering services, qualifies as well. This is because of the nature of the telecom networks that will soon dominate the global economy: they will bundle a whole lot of software with hardware.